Car insurance can be confusing. Today, we’re explaining everything you need to know about deductibles on auto liability insurance.
Is there a deductible on liability insurance? How much should your deductible be? Are you paying too much or too little for your deductible? Keep reading to find out more.
Most Auto Liability Insurance Does Not Have a Deductible
Auto liability insurance is mandatory in most states. This insurance protects other drivers from potential damage you could inflict.
States require you to have a certain amount of property damage liability insurance, which covers damages you cause to other vehicles and property. States also require you to have bodily injury liability insurance, which covers the medical bills and other expenses of other drivers, passengers, or pedestrians injured in a collision.
If you are at fault for the accident, then your insurance will cover your liability up to the limits of your policy. This money is used to cover damage to the other vehicle, the medical bills of the other injured party, and other expenses incurred as a result of the accident.
Why Doesn’t Liability Insurance Have a Deductible?
Comprehensive and collision coverage policies have deductibles because they insure against your own losses.
Liability insurance, meanwhile, covers other people’s losses when you are at fault, which is why they don’t carry a deductible.
Essentially, comprehensive and collision coverage policies are for your own protection, while liability insurance policies are for other drivers.
A deductible doesn’t make sense for liability insurance because having ‘liability’ means you are personally responsible. The injured party has the right to collect the entire amount owed.
If you make a collision coverage claim, on the other hand, your insurance company might reimburse you for the entire claim minus the deductible. If your car required $5,000 of repairs after an accident and you had a $500 deductible, then your insurance company might send you a check for $4,500.
Types of Auto Liability Insurance
Most states require two basic types of liability insurance, including:
Bodily Injury Liability: This insurance covers the medical expenses of the other party if you are found at-fault for the accident. It could also cover lost wages and other personal expenses incurred by the injured party.
Property Damage Liability: Property damage liability covers any damage to property that occurred due to a covered accident where you were at fault. It covers someone’s vehicle repair costs, for example. It can also cover the cost of repairing a fence or building that you damaged.
Do I Have to Pay My Own Deductible If I’m Not At Fault?
If you are not at fault for the accident, then the other driver should pay the deductible for your collision coverage, which covers the cost of repairing your own vehicle after an accident.
However, you may still have to pay your deductible initially – especially if you want immediate compensation for medical bills or vehicle repair expenses.
Then, the other insurance company will go through the subrogation process to get money from the other driver’s insurance company. If this subrogation process is successful, then your deductible will be refunded.
How a Deductible Works
The deductible is the payment you make before your insurance covers the rest.
A deductible prevents drivers from making claims for smaller incidents – like minor damage that costs only $200 to repair.
Generally, comprehensive car insurance deductibles are cheaper than collision car insurance deductibles. A comprehensive car insurance deductible may be around $250, for example, while a collision insurance deductible could be $1,000 or more.
Depending on your aversion to risk and likelihood of making a claim, you can choose the deductible amount that’s right for you.
Auto liability insurance does not typically have a deductible. This insurance is for other drivers – not yourself. Comprehensive and collision coverage do have deductibles because you are making a claim for your own benefit. You will receive a payout based on the assessed amount minus your deductible.
In an at-fault accident where you are responsible for the other driver’s damages, the other driver is entitled to the full amount, which is why a deductible does not make sense.